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| Symantec Reports Solid Third Quarter Earnings |
| Results Driven by a Record Number of Large Deals, Robust Demand for Availability Solutions, and Record Deferred Revenue CUPERTINO, CA, Jan 31, 2006 (MARKET WIRE via COMTEX News Network) -- Symantec Corp. (NASDAQ: SYMC) today reported results for the third quarter of fiscal year 2006, ended Dec. 30, 2005. GAAP revenue for the December 2005 quarter was $1.149 billion and non-GAAP revenue was $1.253 billion. Non-GAAP revenue includes $104 million of deferred revenue that has been eliminated from GAAP results as part of the purchase accounting associated with the acquisition of VERITAS Software Corporation. On a non-GAAP basis, revenue grew five percent over the December 2004 quarter's combined non-GAAP revenue of $1.192 billion. GAAP Results: The December quarter's GAAP net income was $91 million, resulting in fully diluted GAAP earnings per share of $0.08. GAAP net income includes $166 million of expenses related to the amortization of acquired software and intangibles, the amortization of deferred compensation, and integration and restructuring. Non-GAAP Results: Non-GAAP net income was $282 million for the third quarter, five percent higher than the December 2004 quarter's combined non-GAAP net income of $269 million. Non-GAAP fully diluted earnings per share for the quarter was $0.26, up 18 percent as compared to our combined non-GAAP earnings per share of $0.22 in the December 2004 quarter. Non-GAAP earnings per share excludes the write-off of in-process research and development, the amortization of acquired software and intangibles, the amortization of deferred compensation, and integration and restructuring expenses. Non-GAAP results, as presented in the attached consolidated financial statements, exclude certain GAAP expenses, net of tax, and include the results of operations of VERITAS for the applicable periods, including adjustments based on the fair values of assets acquired and liabilities assumed as of the acquisition date of July 2, 2005, and deferred revenue that was eliminated as a result of purchase accounting for the VERITAS acquisition. "Our December quarter was driven by a record number of large transactions and robust performance in backup, email archiving, and high availability solutions," said John W. Thompson, Symantec chairman and chief executive officer. "We continue to believe the combination of our growing deferred revenue balance, broad product portfolio, and diverse customer base will be critical factors in driving consistently predictable results." Revenue Components For the quarter, Symantec's Data Protection segment comprised 26 percent of total revenue and grew 16 percent on a combined non-GAAP basis year-over-year. The storage management segment represented 23 percent of total revenue and grew nine percent year-over-year. The enterprise security business represented 21 percent of total revenue and grew seven percent year-over-year. Services revenue represented four percent of total revenue and grew 38 percent year-over-year. Symantec's consumer business represented 26 percent of total revenue and declined ten percent on a combined non-GAAP basis year-over-year as was expected with the shift to a ratable revenue recognition model. International revenues represented 49 percent of non-GAAP revenue and grew eight percent on a combined non-GAAP basis over the same quarter last year. The Americas, including the United States, Latin America, and Canada, represented 55 percent of total revenue and grew two percent year-over-year. The Europe, Middle East, and Africa region represented 32 percent of total revenue and grew eight percent year-over-year. Asia Pacific/Japan represented 13 percent of total revenue and grew 11 percent on a combined non-GAAP basis year-over-year. March Quarter Forecast For the March 2006 quarter, GAAP revenue is estimated between $1.19 billion and $1.22 billion. This excludes $60 million of deferred revenue that was lost through the purchase accounting for the VERITAS transaction. GAAP fully diluted earnings per share for the March quarter is estimated at $0.10 at the mid-point of the revenue guidance. Non-GAAP revenue for the March quarter is estimated between $1.25 billion and $1.28 billion, including about $60 million of deferred revenue. Non-GAAP fully diluted earnings per share is forecasted at $0.25 at the mid-point of the revenue guidance. Non-GAAP earnings per share excludes approximately $155 million of expenses related to the amortization of acquisition-related intangibles and deferred compensation charges. Fiscal Year 2006 Forecast For the fiscal year ending March 2006, GAAP revenue is estimated between $4.09 billion and $4.12 billion. This excludes $300 million of deferred revenue that was lost through the purchase accounting for the VERITAS transaction and $559 million of revenue related to VERITAS for the quarter ended March 31, 2005. GAAP fully diluted earnings per share for the fiscal year ending in March 2006 is estimated at $0.24 at the mid-point of GAAP revenue guidance. Including $300 million of deferred revenue that was lost through the purchase accounting for the VERITAS transaction and $559 million of revenue related to VERITAS for the quarter ended March 31, 2005, Symantec's non-GAAP revenue for fiscal 2006 is estimated in the range of $4.95 billion and $4.98 billion. Non-GAAP fully diluted earnings per share is estimated at $0.99 at the mid-point of non-GAAP revenue guidance, excluding approximately $980 million related to the write-off of in-process research and development, and expenses related to the amortization of acquisition-related intangibles, deferred compensation charges, integration and restructuring. Fiscal Year 2007 Forecast For the fiscal year ending March 2007, GAAP revenue is estimated in the range of $5.35 billion to $5.55 billion, excluding about $55 million in lost deferred revenue from the VERITAS merger. GAAP fully diluted earnings per share for the fiscal year ending in March 2007 is estimated at $0.59 at the mid-point of the revenue guidance. Non-GAAP revenue is estimated in the range of $5.4 billion to $5.6 billion, including about $55 million in deferred revenue from the VERITAS merger. Non-GAAP fully diluted earnings per share is estimated at $1.14 at the midpoint of guidance, excluding approximately $750 million in expenses related to the amortization of acquisition-related intangibles and stock-based compensation charges. Quarterly Highlights -- Symantec signed 1,134 contracts worldwide worth more than $100,000 each, including 92 deals worth more than $1 million each, during the quarter. Almost 50 percent of these deals included multiple Symantec enterprise products and services. -- Symantec signed new or extended agreements with customers including Accredited Home Lenders, a premier non-prime mortgage company operating throughout the U.S. and in Canada; Enterprise Rent-A-Car; HealthSouth Corporation, one of the nation's largest providers of outpatient surgery, diagnostic imaging and rehabilitative healthcare services, operating facilities nationwide; Sprint Nextel Corporation; Pepco Holdings, Inc., one of the largest energy delivery companies in the Mid-Atlantic region; Progressive Casualty Insurance Company, a leading U.S. auto insurer; UnumProvident Corporation, the industry leader in disability income protection; Ameren, an energy services company; Rohm and Haas Company, an $8 billion specialty materials company; Mervyns LLC, a leading U.S. promotional neighborhood department store; Florida Power & Light Company, among the largest and fastest-growing electric utilities in the U.S.; Hewlett Packard; Encore Credit Corp., a wholesale non-conforming lender; Westchester County, a prominent suburban New York government. -- International customers from the quarter included: Alcatel, which provides communications solutions; Transurban, a leading international toll road developer and investor; MBF Australia, providing health insurance and financial solutions; Samsung Electronics Co., Ltd.; BiG Vent S.A., a leading value added distributor in the nascent and fast growing Enterprise Data Storage Management [DSM] market in Poland; EDAG Engineering, which provides advanced turn-key solutions for tomorrow's vehicles and manufacturing facilities worldwide; British Telecommunications plc (BT); Yonhap News Agency, Korea's sole newswire service; and Fujitsu Services. Conference Call Symantec has scheduled a conference call for 5 p.m. ET/2 p.m. PT today to discuss the results of the third quarter of fiscal year 2006, ended Dec. 30, 2005, and to review guidance for the fourth quarter of fiscal year 2006 and fiscal year 2007. Interested parties may access the conference call on the Internet at http://www.symantec.com/invest/index.html. To listen to the live call, please go to the Web site at least 15 minutes early to register, download, and install any necessary audio software. A replay and script of our officers' remarks will be available on the investor relations' home page shortly after the call is completed. About Symantec Symantec is the world leader in providing solutions to help individuals and enterprises assure the security, availability, and integrity of their information. Headquartered in Cupertino, Calif., Symantec has operations in more than 40 countries. More information is available at www.symantec.com. NOTE TO EDITORS: If you would like additional information on Symantec Corporation and its products, please view the Symantec Press Center at http://www.symantec.com/PressCenter/ on Symantec's Web site. All prices noted are in US dollars and are valid only in the United States. Symantec, the Symantec logo, VERITAS, and the VERITAS logo are trademarks or registered trademarks of Symantec Corporation or its affiliates in the United States and certain other countries. Additional company and product names may be trademarks or registered trademarks of the individual companies and are respectfully acknowledged. FORWARD LOOKING STATEMENTS: This press release contains statements regarding our financial and business results which may be considered forward looking within the meaning of the U.S. federal securities laws, including statements relating to projections of future revenue and earnings per share. These statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from results expressed or implied in this press release. Such risk factors include those related to: the acquisition of VERITAS, including the successful integration of VERITAS' businesses, maintenance of customer and partner relationships and leveraging of synergies; the sustainability of recent growth rates, particularly for our consumer products; the anticipated growth of certain market segments, particularly the enterprise security and international markets; the competitive environment in the software industry; changes to operating systems and product strategy by vendors of operating systems; fluctuations in currency exchange rates; the timing and market acceptance of new product releases and upgrades; the successful development of new products and integration of acquired businesses, and the degree to which these products and businesses gain market acceptance. Actual results may differ materially from those contained in the forward-looking statements in this press release. Additional information concerning these and other risk factors is contained in the Risk Factors section of Symantec's Form 10-Q for the quarter ended September 30, 2005. Symantec assumes no obligation to update any forward-looking information contained in this press release. USE OF NON-GAAP FINANCIAL INFORMATION: In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, Symantec reports non-GAAP financial results. All references to "combined non-GAAP" financial information include the results of Symantec for the December 2004 fiscal quarter and the results of VERITAS for the September 2004 fiscal quarter, and have been adjusted to exclude certain expenses, net of tax, and include adjustments based on the fair values of assets acquired and liabilities assumed as of the acquisition date of July 2, 2005 and deferred revenue that was eliminated as a result of purchase accounting for the VERITAS acquisition. Symantec's management believes the non-GAAP measures used in this release are useful to investors because they provide supplemental information that facilitates comparisons to prior periods. Management uses these non-GAAP measures to evaluate its financial results, develop budgets and manage expenditures. The method Symantec uses to produce non-GAAP results is not computed according to GAAP, may differ from the methods used by other companies and should not be regarded as a replacement for corresponding GAAP measures. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the comparable GAAP results, which is attached to this release. Additional information regarding the reconciliation can be found on the investor relations page of Symantec's Web site, along with additional pro forma financial information for the combined company, at www.symantec.com/invest/center.html.
SYMANTEC CORPORATION
GAAP Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended Nine Months Ended
December 31, December 31,
--------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
(unaudited)
Net revenues $1,149,026 $ 695,224 $2,904,832 $1,870,171
Cost of revenues:
Cost of revenues 183,442 108,163 473,194 293,189
Amortization of acquired
product rights 85,036 13,335 225,521 37,789
--------- --------- --------- ---------
Cost of revenues 268,478 121,498 698,715 330,978
Gross profit 880,548 573,726 2,206,117 1,539,193
Operating expenses:
Sales and marketing 433,094 226,577 1,045,877 616,395
Research and development 187,533 85,289 466,079 241,989
General and administrative 61,753 29,910 151,520 81,773
Amortization of other
intangible assets from
acquisitions 48,427 1,622 98,475 3,656
Amortization of deferred
stock-based compensation(1) 12,329 1,041 28,503 1,680
Acquired in-process research
and development - 1,218 284,000 3,480
Restructuring 15,566 - 20,492 2,776
Integration planning 2,185 - 15,339 -
Patent settlement - - 2,200 -
--------- --------- --------- ---------
Total operating expenses 760,887 345,657 2,112,485 951,749
Operating income 119,661 228,069 93,632 587,444
Interest and other income, net 22,525 13,354 85,246 34,515
Interest expense (6,843) (1,741) (14,346) (12,323)
--------- --------- --------- ---------
Income before income taxes 135,343 239,682 164,532 609,636
Provision for income taxes 44,609 76,105 126,493 193,159
--------- --------- --------- ---------
Net income $ 90,734 $ 163,577 $ 38,039 $ 416,477
========= ========= ========= =========
Net income per share --
diluted* $ 0.08 $ 0.22 $ 0.04 $ 0.58
========= ========= ========= =========
Shares used to compute net
income per share -- diluted* 1,096,609 742,446 1,012,956 738,053
========= ========= ========= =========
____________
(1) Amortization of deferred stock-based compensation is allocated
as follows:
Sales and marketing $ 4,089 $ 223 $ 9,352 $ 469
Research and development 5,658 306 13,526 643
General and administrative 2,582 512 5,625 568
--------- --------- --------- ---------
$ 12,329 $ 1,041 $ 28,503 $ 1,680
========= ========= ========= =========
*For the three and nine months ended December 31, 2004, diluted net income
per share is calculated using the if-converted method. Under this method,
the numerator excludes the interest expense from the 3% convertible
subordinated notes, net of income tax, of $1.2 million and $8.4 million
for the three and nine months ended December 31, 2004, respectively, and
the denominator includes shares issuable from the assumed conversion of
the 3% convertible subordinated notes.
SYMANTEC CORPORATION
Consolidated Balance Sheets
(In thousands, except per share data)
December 31, March 31,
2005 2005
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and short-term investments $ 2,839,540 $ 3,206,587
Trade accounts receivable, net 697,067 285,325
Inventories 36,349 19,118
Current deferred income taxes 186,934 97,279
Other current assets 173,972 79,973
----------- -----------
Total current assets 3,933,862 3,688,282
Property and equipment, net 925,812 382,689
Acquired product rights, net 1,234,093 127,619
Other intangible assets, net 1,451,106 30,739
Goodwill 10,094,821 1,365,213
Other long-term assets 37,177 19,679
----------- -----------
$ 17,676,871 $ 5,614,221
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Convertible subordinated notes $ 507,400 $ -
Accounts payable 189,587 74,685
Accrued compensation and benefits 299,220 140,543
Current deferred revenue 1,666,067 1,215,537
Other accrued expenses 202,810 91,033
Income taxes payable 330,005 179,225
----------- -----------
Total current liabilities 3,195,089 1,701,023
Long-term deferred revenue 202,593 114,724
Long-term deferred tax liabilities 640,932 88,613
Other long-term obligations 36,338 4,408
Stockholders' equity:
Common stock 10,422 7,105
Capital in excess of par value 12,437,744 2,412,947
Accumulated other comprehensive income 154,219 191,938
Deferred stock-based compensation (49,652) (21,070)
Retained earnings 1,049,186 1,114,533
----------- -----------
Total stockholders' equity 13,601,919 3,705,453
----------- -----------
$ 17,676,871 $ 5,614,221
=========== ===========
SYMANTEC CORPORATION
Reconciliation of Consolidated Statements of Operations
to Non-GAAP Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended December 31, 2005
-------------------------------------
GAAP Non-GAAP
Symantec Adjustments Non-GAAP
---------- ---------- ----------
Financial
Statement
Information
Net revenues (1) $1,149,026 $ 104,201 A $1,253,227
Cost of revenues:
Cost of revenues
(1) 183,442 183,442
Amortization of
acquired product
rights (1) 85,036 (85,036) B -
---------- ---------- ----------
Total cost of
revenues (2) 268,478 (85,036) 183,442
Gross profit (2) 880,548 189,237 1,069,785
Operating expenses:
Sales and
marketing (1) 433,094 (798) C 432,296
Research and
development (1) 187,533 (609) C 186,924
General and
administrative (1) 61,753 (772) C 60,981
Amortization of
other intangible
assets from
acquisitions (1) 48,427 (48,427) B -
Amortization of
deferred
stock-based
compensation (1) 12,329 (12,329) D -
Acquired
in-process
research and
development (1) - - -
Restructuring (1) 15,566 (15,566) E -
Integration
planning (1) 2,185 (2,185) F -
---------- ---------- ----------
Total operating
expenses (2) 760,887 (80,686) 680,201
---------- ---------- ----------
Operating income
(2) 119,661 269,923 389,584
Interest and other
income, net (1) 22,525 22,525
Interest expense
(1) (6,843) (6,843)
---------- ---------- ----------
Income before
income taxes (2) 135,343 269,923 405,266
Provision for
income taxes (1) 44,609 78,295 G 122,904
---------- ---------- ----------
Net income (2) $ 90,734 $ 191,628 $ 282,362
---------- ---------- ----------
Net income per
share:
Diluted (2) *** $ 0.08 $ 0.26
Shares used to
compute net income
per share:
Diluted (1) *** 1,096,609 1,096,609
Three Months Ended December 31, 2004
----------------------------------------------------
GAAP Non-GAAP
Symantec* VERITAS** Adjustments Non-GAAP
---------- ---------- ---------- ----------
Financial
Statement
Information
Net revenues (1) $ 695,224 $ 496,658 H $ - $1,191,882
Cost of revenues:
Cost of revenues
(1) 108,163 73,896 H (901) D 182,141
(61) J
901 K
(52) L
195 M
Amortization of
acquired product
rights (1) 13,335 4,376 H (85,486) B -
(4,376) I
72,151 N
---------- ---------- ---------- ----------
Total cost of
revenues (2) 121,498 147,030 (86,387) 182,141
Gross profit (2) 573,726 349,628 86,387 1,009,741
Operating expenses:
Sales and
marketing (1) 226,577 153,037 H - 379,381
(578) J
(28) L
373 M
Research and
development (1) 85,289 87,196 H - 172,063
(608) J
(58) L
244 M
General and
administrative (1) 29,910 49,541 H - 79,026
(24) J
(540) L
139 M
Amortization of
other intangible
assets from
acquisitions (1) 1,622 1,389 H (48,386) B -
(1,389) I
46,764 N
Amortization of
deferred
stock-based
compensation (1) 1,041 4,733 K (5,774) D -
Acquired
in-process
research and
development (1) 1,218 11,500 H (1,218) -
(11,500) I
Restructuring (1) - (9,648) H 9,648 E -
Integration
planning (1) - - - -
---------- ---------- ---------- ----------
Total operating
expenses (2) 345,657 330,543 (45,730) 630,470
---------- ---------- ---------- ----------
Operating income
(2) 228,069 19,085 132,117 379,271
Interest and other
income, net (1) 13,354 13,661 H - 27,015
Interest expense
(1) (1,741) (6,455) H - (10,707)
(2,511) O
---------- ---------- ---------- ----------
Income before
income taxes (2) 239,682 23,780 132,117 395,579
Provision for
income taxes (1) 76,105 36,378 H 42,573 G 126,585
(28,471) G
---------- ---------- ---------- ----------
Net income (2) $ 163,577 $ 15,873 $ 89,544 $ 268,994
---------- ---------- ---------- ----------
Net income per
share:
Diluted (2) *** $ 0.22 $ 0.22
Shares used to
compute net income
per share:
Diluted (1) *** 742,446 1,234,505 P
NOTES:
The above information reflects the combined results of Symantec Corporation
("Symantec") and VERITAS Software Corporation ("VERITAS"), including
amounts related to the amortization of fair value adjustments of assets
acquired and liabilities assumed by Symantec as of the actual acquisition
date of July 2, 2005. For comparative purposes, the information presented
assumes that the acquisition took place on April 1, 2004. If the
acquisition had taken place on April 1, 2004, the fair values of the
assets and liabilities would have been different and actual results of
operations would have been different from those presented above.
Additional non-GAAP adjustments consist of: non-cash charges related to
acquisitions, such as the amortization of intangibles and stock-based
compensation expense, and the write-off of in-process research and
development; restructuring charges; integration planning costs; and the
impact of other special items, such as other stock-based compensation
expense, litigation matters, gain/loss on investments and related
adjustments to provision for income taxes on our operating results.
These non-GAAP financial measures are not prepared in accordance with
generally accepted accounting principles and may be different from
non-GAAP financial measures used by other companies. Non-GAAP financial
measures should not be considered a substitute for, or superior to,
measures of financial performance prepared in accordance with GAAP.
(*) The results of operations include our results for the three months
ended December 31, 2004.
(**) The results of operations include VERITAS' historical results for
the three months ended September 30, 2004, including amortization related
to fair value adjustments based on the fair values of assets acquired and
liabilities assumed as of the acquisition date of July 2, 2005.
(***) For the three months ended December 31, 2004, diluted net income
per share is calculated using the if-converted method. Under this method,
the numerator excludes the interest expense from the 3% convertible
subordinated notes, net of income tax, of $1.2 million for the three months
ended December 31, 2004 and the denominator includes shares issuable from
the assumed conversion of the 3% convertible subordinated notes.
Footnotes:
(1) Symantec includes these non-GAAP financial measures because we believe
these measures are useful to investors in that they allow for greater
transparency to certain line items in our financial statements. We have
historically reported similar non-GAAP financial measures to our investors
and believe that the inclusion of comparative numbers provides consistency
in our financial reporting. Investors are encouraged to review the
reconciliation of the non-GAAP financial measures to the most directly
comparable GAAP financial measures as provided herein.
(2) Symantec's management refers to these non-GAAP financial measures, such
as non-GAAP operating margins and net income, in making operating decisions
because the measures provide meaningful supplemental information regarding
our operational performance and our ability to invest in research and
development and fund acquisitions and capital expenditures. In addition,
these non-GAAP financial measures facilitate management's internal
comparisons to our historical operating results and comparisons to
competitors' operating results. Investors are encouraged to review the
reconciliation of the non-GAAP financial measures to the most directly
comparable GAAP financial measures as provided herein.
A To include VERITAS' deferred revenue that was excluded as a
result of adjustments to fair value.
B To exclude non-cash charges of amortization of acquired
product rights, amortization of other intangible assets and
the write-off of acquired in-process research and
development.
C To exclude executive incentive bonuses related to the
VERITAS acquisition.
D To exclude amortization of deferred stock-based
compensation.
E To exclude charges relating to restructuring.
F To exclude the Symantec and VERITAS integration planning
costs.
G To adjust the provision for income taxes to reflect the
effect of the non-GAAP adjustments on net income (loss).
H To include VERITAS' historical results of operations for
the three months ended September 30, 2004.
I To eliminate VERITAS' historical amortization of developed
technology, other intangible assets and the write-off of
in-process research and development.
J To eliminate VERITAS' historical amortization of deferred
stock-based compensation.
K To amortize deferred stock-based compensation related to
the VERITAS acquisition.
L To amortize VERITAS' lease obligation in excess of fair
value.
M To record additional depreciation expense on VERITAS'
property and equipment as a result of the adjustment to
fair value.
N To amortize acquired product rights and other intangible
assets related to the VERITAS acquisition.
O To amortize the discount on VERITAS' convertible
subordinated debt as a result of adjustment to fair value.
P Diluted shares are equal to Symantec historical shares plus
VERITAS historical shares multiplied by the exchange ratio
of 1.1242.
SYMANTEC CORPORATION
Reconciliation of Consolidated Statements of Operations
to Non-GAAP Statements of Operations
(In thousands, except per share data)
(Unaudited)
Nine Months Ended December 31, 2005
-----------------------------------------------
GAAP Non-GAAP
Symantec VERITAS* Adjustments Non-GAAP
---------- ---------- ---------- ----------
Financial Statement Information
Net revenues (1) $2,904,832 $ 559,258 A $ 240,481 J $3,704,571
Cost of revenues:
Cost of revenues (1) 473,194 87,657 A (901)K 559,599
(401)B
901 C (1,057)L
(52)D
258 E
Amortization of
acquired product
rights (1) 225,521 7,424 A (297,672)M -
(7,424)F
72,151 G
---------- ---------- ---------- ----------
Total cost of
revenues (2) 698,715 160,514 (299,630) 559,599
Gross profit (2) 2,206,117 398,744 540,111 3,144,972
Operating expenses:
Sales and marketing (1) 1,045,877 165,652 A (3,094)L 1,205,903
(1,396)B (1,568)N
(28)D
460 E
Research and
development (1) 466,079 97,510 A (2,700)L 558,436
(1,331)B (1,366)N
(58)D
302 E
General and
administrative (1) 151,520 87,907 A (2,297)N 201,962
(60)B (30,000)O
(540)D (4,826)L
258 E
Amortization of other
intangible assets
from acquisitions (1) 98,475 2,430 A (145,239)M -
(2,430)F
46,764 G
Amortization of deferred
stock-based
compensation (1) 28,503 4,733 C (33,236)P -
Acquired in-process
research and
development (1) 284,000 (284,000)M -
Restructuring (1) 20,492 (20,492)Q -
Integration planning (1) 15,339 (15,339)L -
Patent settlement (1) 2,200 (2,200)R -
---------- ---------- ---------- ----------
Total operating
expenses 2,112,485 400,173 (546,357) 1,966,301
---------- ---------- ---------- ----------
Operating income (2) 93,632 (1,429) 1,086,468 1,178,671
Interest and other
income, net (1) 85,246 15,532 A 100,778
Interest expense (1) (14,346) (5,198)A (22,055)
(2,511)H
Gain on strategic
investments (1) - 732 A (732)S -
---------- ---------- ---------- ----------
Income before income
taxes (2) 164,532 7,126 1,085,736 1,257,394
Provision for income
taxes (1) 126,493 47,042 A 244,520 I 391,631
(26,424)I
---------- ---------- ---------- ----------
Net income (2) $ 38,039 $ (13,492) $ 841,216 $ 865,763
---------- ---------- ---------- ----------
Net income per share:
Diluted (2) **** $ 0.04 $ 0.74
Shares used to compute
net income per share:
Diluted (1) **** 1,012,956 1,175,261
Nine Months Ended December 31, 2004
-----------------------------------------------
GAAP Non-GAAP
Symantec** VERITAS*** Adjustments Non-GAAP
---------- ---------- ---------- ----------
Financial Statement Information
Net revenues (1) $1,870,171 $1,467,439 A $3,337,610
Cost of revenues:
Cost of revenues (1) 293,189 224,948 A (2,703)K 518,221
(364)B
2,703 C
(156)D
604 E
Amortization of acquired
product rights (1) 37,789 12,255 A (300,142)M -
(12,255)F
262,353 G
---------- ---------- ---------- ----------
Total cost of
revenues (2) 330,978 490,088 (302,845) 518,221
Gross profit (2) 1,539,193 977,351 302,845 2,819,389
Operating expenses:
Sales and marketing (1) 616,395 447,655 A 1,060,642
(4,440) B
(84) D
1,116 E
Research and
development (1) 241,989 250,700 A 490,790
(2,444) B
(174) D
719 E
General and
administrative (1) 81,773 143,679 A 223,452
(792) B
(1,620) D
412 E
Amortization of other
intangible assets from
acquisitions (1) 3,656 6,192 A (143,948)M -
(6,192)F
140,292 G
Amortization of deferred
stock-based
compensation (1) 1,680 14,199 C (15,879)P -
Acquired in-process
research and
development (1) 3,480 11,900 A (3,480)M -
(11,900)F
Restructuring (1) 2,776 (9,648)A 6,872 Q -
Integration planning (1) - -
Patent settlement (1) - -
---------- ---------- ---------- ----------
Total operating expenses 951,749 979,570 (156,435) 1,774,884
---------- ---------- ---------- ----------
Operating income (2) 587,444 (2,219) 459,280 1,044,505
Interest and other
income, net (1) 34,515 35,425 A 69,940
Interest expense (1) (12,323) (18,157)A (38,013)
(7,533)H
Gain on strategic
investments (1) - 7,496 A (7,496)S -
---------- ---------- ---------- ----------
Income before
income taxes (2) 609,636 15,012 451,784 1,076,432
Provision for
income taxes (1) 193,159 121,805 A 122,181 I 344,458
(92,687)I
---------- ---------- ---------- ----------
Net income (2) $ 416,477 $ (14,106) $ 329,603 $ 731,974
---------- ---------- ---------- ----------
Net income per share:
Diluted (2) **** $ 0.58 $ 0.60
Shares used to compute
net income per share:
Diluted (1) **** 738,053 1,234,877T
The above information reflects the combined results of Symantec Corporation
("Symantec") and VERITAS Software Corporation ("VERITAS"), including
amounts related to the amortization of fair value adjustments of assets
acquired and liabilities assumed by Symantec as of the actual acquisition
date of July 2, 2005. For comparative purposes, the information presented
assumes that the acquisition took place on April 1, 2004. If the
acquisition had taken place on April 1, 2004, the fair values of the
assets and liabilities would have been different and actual results of
operations would have been different from those presented above.
Additional non-GAAP adjustments consist of: non-cash charges related to
acquisitions, such as the amortization of intangibles and stock-based
compensation expense, and the write-off of in-process research and
development; restructuring charges; integration planning costs; and the
impact of other special items, such as other stock-based compensation
expense, litigation matters, gain/loss on investments and related
adjustments to provision for income taxes on our operating results.
These non-GAAP financial measures are not prepared in accordance with
generally accepted accounting principles and may be different from
non-GAAP financial measures used by other companies. Non-GAAP
financial measures should not be considered a substitute for, or
superior to, measures of financial performance prepared in
accordance with GAAP.
(*) The results of operations include VERITAS' historical results for the
three months ended March 31, 2005, including amortization related to fair
value adjustments based on the fair values of assets acquired and
liabilities assumed as of the acquisition date of July 2, 2005.
(**) The results of operations include our results for the nine months
ended December 31, 2004.
(***) The results of operations include VERITAS' historical results
for the nine months ended September 30, 2004, including amortization
related to fair value adjustments based on the fair values of assets
acquired and liabilities assumed as of the acquisition date of
July 2, 2005.
(****) For the nine months ended December 31, 2004, diluted net income
per share is calculated using the if-converted method. Under this method,
the numerator excludes the interest expense from the 3% convertible
subordinated notes, net of income tax, of $8.4 million for the nine
months ended December 31, 2004 and the denominator includes shares
issuable from the assumed conversion of the 3% convertible
subordinated notes.
Footnotes:
(1) Symantec includes these non-GAAP financial measures because we
believe these measures are useful to investors in that they allow for
greater transparency to certain line items in our financial statements.
We have historically reported similar non-GAAP financial measures to
our investors and believe that the inclusion of comparative numbers
provides consistency in our financial reporting. Investors are
encouraged to review the reconciliation of the non-GAAP financial
measures to the most directly comparable GAAP financial measures as
provided herein.
(2) Symantec's management refers to these non-GAAP financial measures,
such as non-GAAP operating margins and net income, in making operating
decisions because the measures provide meaningful supplemental
information regarding our operational performance and our ability to
invest in research and development and fund acquisitions and capital
expenditures. In addition, these non-GAAP financial measures facilitate
management's internal comparisons to our historical operating results
and comparisons to competitors' operating results. Investors are
encouraged to review the reconciliation of the non-GAAP financial measures
to the most directly comparable GAAP financial measures as provided herein.
A To include VERITAS' historical results of operations for
applicable periods
B To eliminate VERITAS' historical amortization of deferred
stock-based compensation.
C To amortize deferred stock-based compensation related to
the VERITAS acquisition.
D To amortize VERITAS' lease obligation in excess of fair
value.
E To record additional depreciation expense on VERITAS'
property and equipment as a result of the adjustment to
fair value.
F To eliminate VERITAS' historical amortization of developed
technology, other intangible assets and the write-off of
in-process research and development.
G To amortize acquired product rights and other intangible
assets related to the VERITAS acquisition.
H To amortize the discount on VERITAS' convertible
subordinated debt as a result of adjustment to fair value.
I To adjust the provision for income taxes to reflect the
effect of the non-GAAP adjustments on net income (loss).
J To include VERITAS' deferred revenue that was excluded as
a result of adjustments to fair value
K To exclude amortization of deferred stock-based
compensation.
L To exclude the Symantec and VERITAS integration planning
costs.
M To exclude non-cash charges of amortization of acquired
product rights, amortization of other intangible assets
and the write-off of acquired in-process research and
development.
N To exclude executive incentive bonuses related to the
VERITAS acquisition.
O To exclude $30 million related to the proposed VERITAS
settlement with the SEC.
P To exclude amortization of deferred stock-based
compensation.
Q To exclude charges relating to restructuring.
R To exclude patent settlement costs
S To exclude gains/losses on strategic investments.
T Diluted shares are equal to Symantec historical shares
plus VERITAS historical shares multiplied by the exchange
ratio of 1.1242.
SOURCE: Symantec |
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